Budget Targets Early Education, Costs for College

President Barack Obama’s spending blueprint pairs a new, landmark investment in early childhood education with efforts to contain skyrocketing college costs, building on his efforts to ensure every child is prepared for college and a career.

The budget, released Wednesday, provides the first details on how the president aims to fund his plan for the biggest expansion of early-childhood education since Head Start was launched nearly 50 years ago. The plan would set aside $750 million in 2014 for a new federal-state partnership to create preschool slots for all low- and moderate-income 4-year-olds. Mr. Obama would pay for the new program, dubbed Preschool for All, by increasing the federal tax on cigarettes to $1.95 a pack from $1.01. Some congressional Republicans already have balked at the idea of more federal involvement in preschool.

At the other end of the education arc, the White House is proposing a new program to prod states to contain college costs and is adopting the bones of a Republican proposal unveiled this week that pegs Stafford loans to the 10-year Treasury yield. Stafford loans – the government’s most widely used student loan program — drew intense scrutiny during last year’s presidential campaign when rates on some loans were set to climb to 6.8% from 3.4%. A one-year delay was passed which is set to expire on July 1.

In place of that jump, Mr. Obama appears to have found some consensus with Republicans by adopting a market-based rate designed to keep rates from rising while also allowing the government to break even. The Republican proposal would set the interest rate at three percentage points above the 10-year Treasury yield. Mr. Obama doesn’t offer that level of detail in his budget proposal Wednesday, saying only that student-loan interest rates would remain fixed for the lifetime of the loan.

For now, with Treasury rates so low, student-loan interest would likely be lower than the current rates if the proposal becomes final. Obama administration officials have argued that lowering student-loan interest rates—and thus students’ monthly bills once they get out of college and repay the loans—is crucial to helping students deal with escalating tuition costs.

The budget also calls for expanding student repayment options. That comes at a time when the administration has expanded a program that caps students’ monthly loan payments as a percentage of their discretionary income and then forgives remaining debt after a number of years of on-time payments. Some analysts, including Barclays, have raised concerns that such plans could end up costing taxpayers.

The Ins and Outs of the Federal Budget: Click to see how components of federal spending and revenue have changed over time.

The president’s budget proposal sets aside $71.2 billion in discretionary funds for the Department of Education, a 4.6% increase over the 2012 level. The proposal would continue to invest in Mr. Obama’s favored education initiatives, including a $659 million set aside for the controversial “school turnaround” program, which allows elementary and high school districts to close down low-performing schools, fire all their teachers, or convert them to privately operated charter schools.

The budget also calls for a new $300 million competitive grant program to overhaul the nation’s high schools, which have been resistant to decades of reform efforts. And it earmarks $112 million to help schools improve safety following the mass shooting at Sandy Hook Elementary in Newtown, Conn., that left 26 children and school staff members dead.

Mr. Obama is also proposing a $1 billion competitive grant program aimed at prodding states to overhaul policies, in large part to contain college costs. The model is an expansion of the Race to the Top program used in K-12 schools. Mr. Obama also is asking again for $8 billion to fund job training programs at community colleges, a request Mr. Obama has made before but Congress has not funded.

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